Buying a Franchise: Check Who Owns the Fixtures and Equipment

When you join a franchise network, you will often take on a ready-designed shop concept complete with equipment, furniture and promotional materials. Yet an invoice or a turnkey handover does not reliably establish who owns these items. Before signing, check the ownership and usage rights relating to the business equipment. These determine whether you can replace equipment, use it as security for a loan or continue using it if problems arise.

1. Establish the legal basis for each item

The franchise agreement does not automatically give you ownership of everything on the premises. A coffee machine may be purchased, the till rented and the external signage merely supplied by the franchisor for your use. Even a single equipment package may involve different contracts and owners.

Ask for an inventory that can be checked against quotations, invoices and schedules to the contracts. For key items, it should include at least:

• the precise description, model and, where applicable, serial number;
• the supplier and the actual contracting party;
• whether the item is purchased, rented, leased or provided under another arrangement granting a right to use it;
• the timing and conditions of any intended transfer of ownership;
• any existing third-party rights and the associated contractual documents.

Possession is not the same as ownership. You can use a piece of equipment every day and keep it on your premises without owning it. Likewise, the phrase “equipment included” tells you little on its own about the rights you are acquiring.

Also ask for a breakdown showing whether a package fee covers physical items, installation services or merely the use of a design concept. Paying for planning and installation does not automatically give you ownership of all the materials used.

2. Understand the German legal framework

Germany has no standalone franchise act and no national franchise register. Franchise agreements are treated as contracts combining several different contract types. Equipment is governed in particular by the general provisions of the German Civil Code (BGB), including those on sales, hire and the transfer of ownership. Provisions of the German Commercial Code (HGB) may also apply to commercial transactions.

For movable property, transferring ownership generally requires an agreement to that effect and delivery, although other forms of transfer are legally possible. A purchase contract alone therefore does not necessarily make the buyer the owner. Where a retention-of-title clause has been agreed, the goods typically remain the seller’s property until the purchase price has been paid in full. Broader retention-of-title clauses may cover additional claims and should be reviewed separately.

Pre-contractual duties to provide information arise in particular under sections 311(2), 241(2) and 242 of the BGB. Material restrictions on promised ownership or usage rights may therefore need to be disclosed before the agreement is signed. Standard contract terms are also subject to sections 305 onwards of the BGB, with specific rules applying to contracts between businesses.

Permanently installed fixtures add another layer of complexity. Whether an item remains legally separate or becomes part of the building depends, among other things, on how and why it is attached. Have the legal status of substantial installations assessed rather than assuming that they are property you can freely dispose of.

3. Check financing rights and day-to-day use

Ownership directly affects your options. A bank may require security for finance. Items that are already leased, supplied subject to retention of title or transferred to another party as security are not necessarily available for this purpose. Do not give the bank a blanket declaration that you own all the fixtures and equipment free of third-party rights.

Ask suppliers and the franchisor for a clear account of any existing third-party rights. When buying used equipment from an existing business, it is particularly important to establish that the seller is entitled to transfer ownership. An old invoice is not a reliable substitute for this check.

For rented or leased equipment, also clarify the following in writing:

• Who must arrange and pay for maintenance and repairs?
• Who bears the risk of theft or damage?
• Are you allowed to move, modify or temporarily replace equipment?
• Who provides replacement equipment if something breaks down, and on what terms?

Ownership and contractual freedom to use an item must be considered separately. Even if you own a piece of equipment, binding franchise standards may prevent you from modifying it as you wish. Conversely, a secure long-term right to use an item without owning it may be sufficient for the business. What matters is that the agreed rights fit your operational needs.

4. Make the handover verifiable

Prepare a handover record before formally accepting the equipment. Record the items actually delivered, their condition, serial numbers, accessories and any missing documents. Photograph used equipment and visible damage in particular. Keep proof of purchase, agreements governing use and maintenance records together.

If several companies are supplying items, make sure you know whom to contact about missing or defective goods. The franchisor is not necessarily the seller or hire provider simply because it selected the equipment. Where the transaction is a commercial transaction for both parties, the duty to inspect goods and notify defects under section 377 of the HGB may also be relevant: inspect for defects without delay and report any you find promptly.

Do not sign a blanket confirmation that delivery is complete or that ownership is free of third-party rights while relevant questions remain unresolved. Have discrepancies and outstanding evidence recorded specifically.

Practical takeaway: For every key item of equipment, identify its owner, the relevant contract and a documented right to use it. Only when these three elements align does an attractive equipment package become a dependable foundation for your business.